Power and the appeal of the deal: how consumers value the control provided by Pay What You Want (PWYW) pricing
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Power and the appeal of the deal: how consumers value the control provided by Pay What You Want (PWYW) pricing Michael J. Barone 1 & T. J. Bae 2 & Shanshan Qian 3 & Jason d’Mello 4
# Springer Science+Business Media New York 2017
Abstract The current research offers a number of novel findings regarding how individuals respond to Pay What You Want (PWYW) pricing, a strategy that affords consumers complete control over prices. Two experiments integrate research on consumer power into the PWYW literature to show that PWYW’s influence arises primarily with respect to low-power consumers who use PWYW’s pricing control to regulate their power states. Specifically, PWYW is shown to promote stronger intentions to purchase and to recommend a product than fixed pricing, particularly for low- versus high-power consumers. Supporting the notion that PWYWoffers the powerless a platform for power elevation, experiment 2 reveals that the more favorable responses of low-power consumers to PWYWare accompanied by increased feelings of self-reliance. Further suggesting that low-power consumers value the pricing control afforded by PWYW for power regulation, the effects are not attributed to differences in the amounts that low- and high-power consumers are willing to pay under PWYW. In addition to providing a deeper understanding of PWYW pricing, the present work extends the
* Michael J. Barone [email protected] T. J. Bae [email protected] Shanshan Qian [email protected] Jason d’Mello [email protected]
1
College of Business, University of Louisville, Room 162, Louisville, KY 40292, USA
2
Frank G. Zarb School of Business, Hofstra University, Hempstead, NY 11549, USA
3
College of Business & Economics, Towson University, Towson, MD 21252, USA
4
College of Business Administration, Loyola Marymount University, Los Angeles, CA 90045, USA
Mark Lett
power literature by demonstrating that power restoration can transpire not only from the possession of certain products but also through the pricing mechanism by which such products are obtained. Keywords Pay What You Want (PWYW) pricing . Consumer power . Value perceptions . Word-of-mouth (WOM) Following high-profile adoptions by the band Radiohead and by Panera Cares cafés, Pay What You Want (PWYW) pricing strategies are becoming increasingly common in the marketplace. Though other forms of participatory pricing (e.g., auctions) also afford buyers a role in price setting (e.g., by allowing them to offer bid prices a seller can accept or reject), PWYW is unique in providing consumers full discretion over the prices they pay (Kim et al. 2009). This pricing control presumably underlies PWYW’s ability to improve consumer response in comparison to fixed pricing approaches that give sellers control over pricing (Gneezy et al. 2010; Kim et al. 2009). Though the notion that consumers value the pricing control offered by PWYW has been raised(Kim etal.2009),when and how thisoccurshaveyetto be examined. Wesuggestthatthis aspect of PWYW should be highly valued by consumers experien
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